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How to invest in Real Estate investment Trust (REIT)s?

Updated on August 5, 2017

What is Real Estate investment Trust (REIT)?

Real Estate investment Trust (REIT) is an avenue for investment similar to Mutual funds and stocks. REITs offer returns from Realty projects. They are ideal for first-time and small investors and those who wish to diversify their investment portfolio in new innovative products. Investing in REITs is equivalent to holding assets in Real estate. Through REITs, one can hold real estate asset for as low as Rs 2 lakh. REITs are also a safe investment option for risk-averse investors. DLF, the country’s largest company in the realty sector has already planned to raise Rs 6000crore through REITs. A recent report has estimated that Indian commercial real estate sector offers investment opportunities in REITs worth $43 billion to $54 billion across top cities in the country.

How REITs work? Through REITs, funds are collected from investors, pooled together and then invested in realty projects. REIT unit owners get returns upon Value appreciation of the projects or rental income from the projects. REITs work almost similar to Mutual funds, wherein funds from investors are invested indirectly in stock market and returns from stocks are reaped by investors. REITs are expected to offer around 8% returns to holders at present but this could go up as infrastructure growth picks up. Well managed REITs can offer higher dividends compared to other instruments like Stocks. India is a fast developing economy and hence REITs are sure to be a success. SEBI has already allowed listing of REITs and their units on stock exchanges.

REITs in India are mostly of the Hybrid type, meaning that they invest in both properties as well as mortgages. Apart from this, REITs also invest in office buildings, Malls, Hotels etc. There are location-specific and segment-specific investments in REITs. Government has exempted REITs of minimum alternative Tax (MAT).Recently the government also scrapped the applicability of Dividend Distribution Tax (DDT) on REITs.

How to buy REIT units? Individuals can invest in REITs by purchasing units on an open exchange. This can be done online through a demat account or directly through the REIT. Listing of REITs is expected to commence in 2016

List of Real Estate investment Trust (REITs) in India: Many companies have expressed interest to start REITs in India. Notable among them are DLF, Xander, Embassy Group, Red Fort Capital etc. With chances of government allowing foreign investment in future, REITs could pick up in a great way in India


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